A new report from Reuters has offered a rare inside look at Apple's legendary veil of secrecy, and how the company's desire to prevent information leaks has influenced its relationships with overseas suppliers and manufacturers.

Citing numerous anonymous sources, the report issued Wednesday afternoon revealed that Apple often decides on a supplier only weeks before a product is rumored to launch. Deals with Apple come with a confidentiality clause, and breaches are reportedly met with stiff penalties. Factories have metal detectors, suppliers are issued fake products, and parts are divided among a number of companies so that those who work on the production line often have no idea what the final product will look like.

Sources said it is not common for suppliers to be fined for breaching a confidentiality agreement, though they had heard of companies that were "verbally warned that they were in danger of losing their contract" if leaks continued.

One South Korean supplier allegedly expressed frustration that the Cupertino, Calif., company makes "unreasonable requests," such as custom designs and unique sizes and specifications.

"That means we won't be able to use a common platform or rework those components to serve other clients," the source told Reuters. "And if there's any inventory left, it cannot be used any other way."

The report made mention of an incident in which a reporter, who stood on a public road and took photos of a Foxconn factory, was restrained and kicked by the facility's security guards, who attempted to pull the reporter into the factory, and then into a security vehicle. The reporter contacted the police, and a local police officer reportedly said that Foxconn has "special status" there.

In January, a Foxconn worker in the same town of Guanlan suspiciously died. The Taiwanese manufacturer has been working with local authorities in the ongoing investigation.

Apple's desire to keep projects secret, and the pressure it places on its partners, came under scrutiny last July, when a 25-year-old man reportedly committed suicide after an iPhone prototype he was responsible for went missing. One report said the man was subjected to "unbearable interrogation techniques" in the ensuing investigation by his employer, Foxconn.

The company later said that the man had a suspicious history of losing products. Apple officially commented on the matter, stating that the company requires its suppliers to "treat all workers with dignity and respect."

Reuters also noted that the company sued two Chinese reporters in 2006, asking for $4.4 million for exposing alleged substandard employment practices. That same year, Apple voluntarily conducted its first audit of Foxconn, and found that most of the manufacturer's facilities were in compliance with the law.

Apple has continued its audits of overseas partners in years since. In 2009, Apple's responsibility progress report found more than half of Apple's partners' factories in China were not properly paying their workers. In addition, 23 of 83 surveyed factories were not even paying some of their employers China's minimum wage.

Apple probably has more manufacturing clout than any other tech company out there these days. If the manufacturers don't want to play by their customer's (Apple's) rules, they don't have to do business. However, Apple does need to follow up on their "treat all workers with respect" words. They did a great job improving their environmental impact over the past three or four years. Perhaps the next step is to publicly, transparently set standards for its manufacturers - then enforce them with inspections.

Apple's got $30 billion in cash. They can afford to pay their factory workers the Chinese minimum wage, give them breaks, be treated humanely, etc. It's fine if they want to be secretive - they just need to be aware of the environment this causes for their suppliers and ensure that people are treated with respect.

Apple probably has more manufacturing clout than any other tech company out there these days. If the manufacturers don't want to play by their customer's (Apple's) rules, they don't have to do business. However, Apple does need to follow up on their "treat all workers with respect" words. They did a great job improving their environmental impact over the past three or four years. Perhaps the next step is to publicly, transparently set standards for its manufacturers - then enforce them with inspections.

Apple's got $30 billion in cash. They can afford to pay their factory workers the Chinese minimum wage, give them breaks, be treated humanely, etc. It's fine if they want to be secretive - they just need to be aware of the environment this causes for their suppliers and ensure that people are treated with respect.

One South Korean supplier allegedly expressed frustration that the Cupertino, Calif., company makes "unreasonable requests," such as custom designs and unique sizes and specifications.

Hmm, I wonder what part of the term 'contract manufacturer' do they not understand.

Most of these manufacturers, although not able to use the exact same parts in other projects, gain invaluable information from cutting-edge manufacturing techniques, which Apple is always adopting.

One of my friends works at A***e and claims that most of the processes must remain proprietary for a period of time after the manufacturing run ends, after which they can apply to other customers' projects. Thus, those shiny new Dell laptops with screws that look like they weren't purchased at the local Ace Hardware store might have come from a spec originally developed by Apple.

Apple probably has more manufacturing clout than any other tech company out there these days. If the manufacturers don't want to play by their customer's (Apple's) rules, they don't have to do business. However, Apple does need to follow up on their "treat all workers with respect" words. They did a great job improving their environmental impact over the past three or four years. Perhaps the next step is to publicly, transparently set standards for its manufacturers - then enforce them with inspections.

Apple's got $30 billion in cash. They can afford to pay their factory workers the Chinese minimum wage, give them breaks, be treated humanely, etc. It's fine if they want to be secretive - they just need to be aware of the environment this causes for their suppliers and ensure that people are treated with respect.

Agreed. Im sure Apple is doing somethingand theyre probably even among the BEST in this regard, while tons of other companies arent newsworthy. But are they doing enough? They werent in the past.

"That means we won't be able to use a common platform or rework those components to serve other clients," the source told Reuters. "And if there's any inventory left, it cannot be used any other way."

What a shame. They aren't allowed to sell Apple's IP to other customers who want to create a copycat device. This is the biggest problem in doing business in China. I have been approached by two manufacturers who wanted to offer me the opportunity to sell a device in the US that is very similar to XYZ product. The extra/leftover parts go into making a device to compete with the original company. And worst of all because the copycat device has little investment in R&D etc., it can undercut the price of the original device.

One the backside the factory gets a better price on components because the now buy enough for the original device and the copycat device, netting the factory even higher profits.

I feel for the people who actually assemble the component but not their management/owners.

One South Korean supplier allegedly expressed frustration that the Cupertino, Calif., company makes "unreasonable requests," such as custom designs and unique sizes and specifications. "That means we won't be able to use a common platform or rework those components to serve other clients," the source told Reuters. "And if there's any inventory left, it cannot be used any other way."

Uhh, he says that like it's a bad thing. One of the things that make Apple products unique is they they tend NOT to be assemblages of the same off-the-shelf parts everyone else uses. That's what PCs are. Maybe someone needs to have a chat with this supplier.

How about the fact that they actually survey the plants and publish the findings, wow what a concept eh?

It goes along the same lines of eco-friendly groups ripping apple up for not being "green" and apple turns around is rated as the most eco-friendly company. Wow again huh. Stick to trolling things that are trollable.

Apple's got $30 billion in cash. They can afford to pay their factory workers the Chinese minimum wage, give them breaks, be treated humanely, etc. It's fine if they want to be secretive - they just need to be aware of the environment this causes for their suppliers and ensure that people are treated with respect.

It's actually more than $30 billion now, but that's not going to change what anyone in China is paid. These workers don't work for Apple, they work for the Chinese contractor, and the Chinese contractor bids the work competitively.

How about the fact that they actually survey the plants and publish the findings, wow what a concept eh?

It goes along the same lines of eco-friendly groups ripping apple up for not being "green" and apple turns around is rated as the most eco-friendly company. Wow again huh. Stick to trolling things that are trollable.

Aren't you being a little harsh? I don't see what's wrong with giving Apple the benefit of the doubt based on its generally good corporate citizenship. I am not opposed to following up with on-site investigations, but I don't think we have to have absolute skepticism when it comes to Apple.

BTW, I was very pissed at Greenpeace when they took Apple to task, and told them so. But later I learned that in response, Apple made some significant improvements. Apple's current credentials as an eco-friendly company come in part because of Greenpeace's prodding.

In any event, to label this guys comments as trolling seems a bit over top to me.

Not judging you, I have probably done the same from time to time. Just an observation.

If we ever go to war (hot or cold) with China, you'd better keep your old Apple device going for the duration, because you won't be able to buy a new one until it's over.

Highly unlikely there would be a war, they'd be risking their own money! I read this morning that Japan just passed China as the biggest lender to the US. You can bet they still want a return on their investments.

Im sure Apple is doing somethingand theyre probably even among the BEST in this regard, while tons of other companies arent newsworthy.

I do not know about other US companies, but I can safely say that several European companies do a lot more. From much more precise supplier terms (Apple's are really superficial), frequent random checks, providing anonymous complaint hotlines, to even putting undercover workers or permanent reps into companies, if there are any doubts. (No, I am not saying that solves all the problems but it sure makes it less convenient for the bad boys.) Apple pretty much relies on paperwork, and that is more CYA than efficient. So, their checks indicated that a huge amount of their suppliers does not pay enough and that people do work too many hours... does that help? There are several developing countries with high industry standards throughout Asia. If China is unable an unwilling, move elsewhere... If this increases production cost by 2-3% (hardly more), so what?

I think if Apple wants utmost control over secrecy they will need to bring EVERYTHING in house. They have the potential with PA Semi so if they spend some of that $50 billion dollars on creating manufacturing and pressing plants they will be able to ensure secrecy.

I think if Apple wants utmost control over secrecy they will need to bring EVERYTHING in house. They have the potential with PA Semi so if they spend some of that $50 billion dollars on creating manufacturing and pressing plants they will be able to ensure secrecy.

That is my most fervent hope, but it's probably not going to happen. I believe PA Semi is not a fabricator, but just a designer--much like Apple. Perhaps they do press their own silicon, I don't know.

I am afraid we have become so accustomed to paying relatively cheap prices for consumer electronics, that the additional costs that U.S. manufacture would add to the retail price would be an impossible sell. We heard the criticism when it was speculated that the new iPad would start at $1000 didn't we? Even now that we know the price scale, I bet even the cheapest one would be even more than $1K if it were built here.

Bottom line, there is a price to be paid for fairness. Talk and sympathy are cheap. If you want those who labor to make your products to have a decent life, you have to be willing to pay for it. Blaming Apple and other companies for poor working conditions is not enough. You have to be willing to pay more for their products.

Big deal. Intellectual property theft and manufacturing theft i.e. fake iPhones from China are rampant in the Asian Markets. So what if Apple wants to keep their products proprietary. Good for them. Non-disclosure agreements are great. Tight security, metal detectors...sweet.

Hmm, I wonder what part of the term 'contract manufacturer' do they not understand.

Most of these manufacturers, although not able to use the exact same parts in other projects, gain invaluable information from cutting-edge manufacturing techniques, which Apple is always adopting.

One of my friends works at A***e and claims that most of the processes must remain proprietary for a period of time after the manufacturing run ends, after which they can apply to other customers' projects. Thus, those shiny new Dell laptops with screws that look like they weren't purchased at the local Ace Hardware store might have come from a spec originally developed by Apple.

Apple has to rely on the contract manufacturs to design its parts. For example Apple does not know how to make touch screens, batteries and flash memory. It has to rely on the contractors to design and make those parts that can be incorporated into an Apple product. If Apple wants a battery of a certain shape for its iPods, or an aluminium shell of a certain design for its laptop, it has to totally rely on others to make them, as Apple does not have the technology to make them. So Apple should not ask for too much.

Some of these reporters and other commentators live in some weird dream world where beer is free or something. It's like they are 16 years old and have never met people who work in jobs that require secrecy. It's pretty simple, if your job requires you not to talk about what you are doing, you don't. If you do, the best thing that can happen is that you'll be fired, if you're lucky.

These secrecy conditions appear perfectly normal. Don't know about workers' rights and stuff in China such as a competitive wage, or the rather subjective minimum wage, working conditions, work hours, etc, but talking about someone else's IP is not within their rights.

Apple's secrecy rules have nothing to do with working conditions, and the two aren't related. Seems rather manipulative to conflate the two.

If the USA grew any balls and invested in manufacturing technology so as to be competitive with foreign manufactures, workers in these manufacturing plants will be subject to the same secrecy rules.

That is my most fervent hope, but it's probably not going to happen. I believe PA Semi is not a fabricator, but just a designer--much like Apple. Perhaps they do press their own silicon, I don't know.

Probably? It's never. The cost of a developing a leading edge fab process is something like 10 billion now (for 45/32 nm) and it'll double for every new process. To recoup the cost, Apple would have to sell 10+ billion more of product on top of what they are doing now to break even, and I'm pretty sure they'll want at least 40% to 45% margin on the fab process. It's simply not possible. There will only be 2 or 3 semiconductor manufacturers in the future: Intel's consortium, Samsung's consortium, and IBM's consortium. That's just to manufacture the SoC.

Besides the semiconductor manufacturer's are mostly in modernized countries, the state-of-art fabs.

It's the assembly plant conditions everyone is "complaining" about where components are delivered and assembled into a product.

Quote:

I am afraid we have become so accustomed to paying relatively cheap prices for consumer electronics, that the additional costs that U.S. manufacture would add to the retail price would be an impossible sell. We heard the criticism when it was speculated that the new iPad would start at $1000 didn't we? Even now that we know the price scale, I bet even the cheapest one would be even more than $1K if it were built here.

Bottom line, there is a price to be paid for fairness. Talk and sympathy are cheap. If you want those who labor to make your products to have a decent life, you have to be willing to pay for it. Blaming Apple and other companies for poor working conditions is not enough. You have to be willing to pay more for their products.

A decent life is a rather subjective term. Truly it is. It is difficult to relate on what a decent life means to people who are so removed from Western culture. It is at best misinformed to developed opinions based on these premeditated controversial media reports.

Laws, Mac, sausages, babies, and on and on... Birth, labor, delivery -- all those can be messy...

Debating Capitalism vs. Socialism, and all other ISMs, as is sometimes the case on this Forum is endless! But luckily, it could be worse -- if politics and religion off topic stuff spills into this Forum...!

SPYING -- we can only imagine what's going on in the tech world, and other worlds, with BILLIONS on the line, stock manipulation etc. It's a miracle that we don't hear more about Sabotage...

In the corporate lingo I heard word = execution! It's amazing how all those giant visions get implemented, executed etc. on such a giant international scale... A lot of great minds at work! How in the world do they ever sleep, starting with Steve Jobs, at Apple, as just one example?! Yes, all those execs have secretaries, and chains of command, but still -- stress!!!

Even if all Apple manufacturing was done in the US, there still would be spying etc... And then it's back to the same Infinite Loop (pun intended) of Labor Costs vs. Talk Is Cheap, Outsourcing debate...

PR Wars... -- rumors planted, trolls, pro-trolls, etc. I wonder what we'd discover if all the Apple related stories sources were investigated. Agendas etc... I bet all companies try to keep as much secret as they can. Dumping on Apple for being the most secretive is being made into a unique thing, when it's likely not. Maybe that "dumping" is a diversion move itself? How can we really know? Can we always believe what we read/hear/see? Of course not...

I welcome Apple's efforts to do all they can to make sure that their workers in US, and Outsourcing Countries are treated well... But, if a strike in China (I think) is timed to the iPad Announcement, then its timing can be questioned! To automatically take one side or the other might be a rush to judgement!

I am not a huge fan of Conspiracy Theories in general, but, to deny a possibility of some of that stuff being plausible would be naive, I think!

Thanks to all for your comments! This Forum, with its content and tools [Powered by vBulletin® Version 3.8.4] is EXCELLENT, if not the best!!!

I am afraid we have become so accustomed to paying relatively cheap prices for consumer electronics, that the additional costs that U.S. manufacture would add to the retail price would be an impossible sell. We heard the criticism when it was speculated that the new iPad would start at $1000 didn't we? Even now that we know the price scale, I bet even the cheapest one would be even more than $1K if it were built here.

This notion is incorrect on so many levels (sorry I'm attacking it in general not just from your comment). The idea that the cost would go up is not necessarily correct. Think about it, by not having to import then Apple wouldn't pay customs duties. By not having to supply parts from other companies they can do things cheaper overall. By making their own parts they have the potential to supply other companies so they get more bang for buck.

The fact that it costs $10 billion roughly to setup a fabrication plant is not the issue. Apple made $15 billion in profits last year leaving $5 billion if they made their own plant. Labour costs might go up but then they can make that money back elsewhere with reduced costs so the cost of the end products can stay relatively the same. They would also be able to blow away the competition by manufacturing their own processors that aren't on the market bringing in the potential to bring out Intel and AMD killers and progress the development of RAM and other technologies rather than having to wait until someone makes something you can use.

Apple probably has more manufacturing clout than any other tech company out there these days. If the manufacturers don't want to play by their customer's (Apple's) rules, they don't have to do business. However, Apple does need to follow up on their "treat all workers with respect" words. They did a great job improving their environmental impact over the past three or four years. Perhaps the next step is to publicly, transparently set standards for its manufacturers - then enforce them with inspections.

Apple's got $30 billion in cash. They can afford to pay their factory workers the Chinese minimum wage, give them breaks, be treated humanely, etc. It's fine if they want to be secretive - they just need to be aware of the environment this causes for their suppliers and ensure that people are treated with respect.

Very thoughtful comment...

I remember when Sears was the big dog in retailing (pre-Walmart days) and they would visit a small manufacturer in Iowa or NJ and say we need x amount of widgets for all our stores! The small manufacturer would think he just got shat on by the golden goose! (a good thing!) they would invest (borrow) to expand, retool their plant only to be visited the next year by Sears and be told to keep the contract they had to produce it for a lot less than the current price. The small manufacturer had to accept it and basically ended up just wearing out their machinery, plant and really working for nothing!